Disunity looks like Washington


Dear Client:

Incoming WSWA chairman Charlie Merinoff (ceo and chairman of Charmer Sunbelt Group) urged listeners at the 69th Annual WSWA Convention & Exposition to come together and work towards the greater cause of building this industry. The CARE Act (HR 1161), of course, has been a majorly controversial piece of legislation in the industry, while privatization in Washington State has also taken center stage. While working on CARE and Washington State over the past year, Charlie began to look at the wine and spirits industry "as a microcosm of the world. Here we are with major issues, major changes facing us. If we can't come together as an industry, why should we expect our [country's] leaders to?"

Right now he believes the industry is at a crossroads and faces two critical choices. "One choice is we continue to go the way we're going," where the WSWA, DISCUS and retailers, for example, all have their own separate political agendas. "And we all go our merry way."

That option, said Charlie, led to voters in Washington passing a privatization initiative (I-1183) pushed by Costco. "The good news is for the first time we know what that option looks like and it's called Washington State. If we don't come together and allow other people to make those decisions for us because they see the industry isn't aligned," then they'll take advantage and push their agenda.

"I'll tell you no one is happy in Washington State," said Charlie, noting that he's spoken with both suppliers and wholesalers in the state who are wondering, "'who thinks this is a good thing?'" He believes even Costco may regret it one day. "I bet that at the end of the day, even Costco who wanted this will look back and say 'this was a mistake doing it this way.'"

Suppliers, wholesalers and retailer uniting is the only positive option. "The other option is we do come together. That we do work together to come up with a common agenda, put our differences aside. I truly believe if we do that we can prevail in the marketplace," he said.

"How can we get there? We start by meeting with different groups of this industry." Charlie noted that the WSWA has already met with DISCUS and the Presidents' Forum, and has meetings booked with the Wine Institute, ABL and Wine America. "What we hope to do is what we did with DISCUS, where we identify some common things that are very important to us. We've decided to take the things that were divisive, like CARE, and put it aside." Then they will form teams to find the best way to address their common agendas.

"I truly believe if we and our suppliers can put our differences aside and focus on what is really the greater good of the industry, and take those things that are truly divisive and put them aside. If we really start to work together, I truly believe we can shape a much better world for ourselves."

THE VALUE OF THE DISTRIBUTOR. Wine and spirits distributors go beyond their actual function, said Charlie. "I think it's confusing in terms of the role of the distributor.. If we look at our political agenda, you would think that the value of the distributor is defined by the laws of the state. But that is how our existences was derived." It goes further than that. "It's not about being defined by the laws of our existence" or "by the logistics that we do. but by the value we created by bringing the brands to the marketplace."

Charlie points out that even if opponents were successful in overthrowing the three-tier system, "there is always going to be a distributor" - whether it's the state, the supplier or a retailer like Costco.

But wine and spirits distributor go beyond their logistical function. True, to their suppliers they are "an efficient, optimal route to market," but distributors are also a "viable link" to the thousands of different retailers. They have developed sales structures for suppliers, developed "new capabilities for local marketing," and they have "political clout" in their local communities.

To retailers "we're indispensable," said Charlie, as distributors bring brand information, new items, innovation, marketing intelligence, and not to mention the actual brands.

"For the state it's simple.. We make sure of the quality of the product and collection of taxes.. Something we never think about is the quality of the products we sell, the safety of the products we sell.. There's a huge motivation for counterfeiting, and again those things don't happen because of the tight control of the three tier system that we have."

THE BIG PICTURE. "For my generation, I hope we will be remembered for the collaboration, integration and innovation that we will bring to the business today," said Charlie. "Collaboration with our suppliers, and collaboration with our customer. The integration of the two tiers."

"I truly believe the future is bright. I think we have a terrific opportunity to shape our future and I feel absolutely blessed to be here today."


After accepting the Sidney Frank Award, Sazerac chief Mark Brown reminded the industry of the importance of preserving the three-tier system.

"The main thing is the 21st Amendment of the Constitution of the United States of America, and the resulting three-tier system and the resulting system of state-based regulation. It has served us so well that there are people in this country who actually believe we don't need it anymore because all we're doing is selling milk and chips." But the fact remains "that what we sell is not milk and chips." If we leave beverage alcohol unregulated then "it will take a course of its own," said Mark.

One result would be "this gathering never taking place, and secondly you would all be having a very different dialogue. We would be talking about out of control drinking habits. We would be talking about increased taxes. We would be talking about advertising bans. We would be talking about increased regulation. We would be talking about counterfeiting goods. We would be talking about minimum pricing. We would be talking about a market dominated by two retailers, and we would be talking about a market where launching new products is practically impossible." So it's up to the industry to make sure that never happens.


PISCO PORTON HIRES JEAN-FRANCOIS BONNETE AS COO. Jean-Francois has 12 years of brands building experience in the US, most recently as vp of spirits at W.J. Deutsch & Sons. Before that he was North American director of Cognac Ferrand USA where he spent 10 years developing the cognac category. Jean-Francois is chairman of the French-American Chamber of Commerce and was knighted in 2011 for his contribution to the French wine and spirits industry. "Pisco is still relatively unknown in most of the U.S. and we are confident that his industry credibility and proven success in developing categories will assist the brand in realizing its potential," said Pisco vp and cfo Brent Kallop.

HENNESSY LAUNCHES NEW AD CAMPAIGN. Moet Hennessy USA is unveiling a new marketing campaign behind Hennessy Cognac called "Wild Rabbit." The theme is based on individuals pushing their limits in order to achieve, and highlights icons including boxer Manny Pacquiao, singer Erykah Badu and director Martin Scorsese. This marks Hennessy's largest marketing investment in its two hundred and forty seven-year history. The campaign will be backed by pop-up installations in New York City, Chicago, and Los Angeles, digital advertising and spots in national magazines and on billboards.

After experiencing success with Menage a Trois red and white blends, parent company Trinchero Family Estates has announced the release of Menage a Trois pinot grigio. As the demand for different varietals continues so will the company's expansion. "Consumer demand for the brand continues to grow, so it was a natural progression to produce a pinot grigio, the ideal complement to our existing counterparts, " said marketing director Tim Peters. The pinot grigio is available nationwide now and the suggested retail price is $9.99 a bottle.

DRINKS AMERICAS EXPANDS KAH WITH R&R. KAH Tequila, owned by Drinks Americas Holdings, is now in 45 markets in the US and has just announced it will partner with R&R Marketing to distribute the spirit in New Jersey. R&R is part of the Charmer Sunbelt Group, one of the nation's leading distributors of wines, spirits beer and other beverages.

Until tomorrow, Megan

"We do not know what we want and yet we are responsible for what we are - that is the fact."
Jean-Paul Sartre

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